Sunday, November 25, 2012

Don't Build a House of Cards


Don't Build a House of Cards

By Keith Bunn Jr.
November 25, 2012


The only reason I'm posting this is to give you an example of what NOT to do!!! The guy who wrote this posting, Kevin McKee did this and thought that it was a good plan, but his plan only works if nothing goes wrong. In a sense, he is not factoring in risk. From everything I've read, he has taken on a whole bunch of risk!!  As he put it in his posting,"There are No Absolutes in Personal Finance". We don't know what will happen! So let's go over what he did a bit at a time.

He said that he... "had to sell essentially all of my stocks, drain my Roth IRA, and even take a loan against my 401k to get the money for the down payment, but after doing all of that, I now have enough money for closing." But he even admits, "I actually don’t even know exactly how much I’ll need at closing because all the paperwork and stuff isn't done." So how does he have enough money for his closing & what if after all that he's still short for the closing?

Putting all that off to the side for now, I have no problem with him selling off his stocks to put towards the down payment to the house he wants to buy, but cashing in his Roth IRA & taking a loan out of his 401K is a whole other matter. Just those two things tells me that he is trying to buy a house that he can't afford. Not because he is taking out a mortgage to get it but because he has liquidated and taken out loans from his retirement accounts just for the down payment. The Roth IRA for example, because a Roth grows tax free, he didn't have to pay taxes when he cashed it out, but he did have to pay a penalty for withdrawing it out early. But what makes me dislike this part of the plan the most is that most of the money in his investment was growth. For example: if you take $2000 and invest it at 10% rate of return for 20 years, that would be $14,656.19. $12,656.19 of that was interest and that was all tax free. Now I don't know and he didn't say how much he had in that account, but he missed out on a bunch of money.

The 401K loan is a horse of a different color. When you take out a 401K loan, you are taking a loan out of a tax-deferred retirement plan and you pay yourself back, sometimes with interest. But if you take out a loan from this account and you leave your job, that loan comes due right then and there and if you don't pay it back within 60 days, not only will you have to pay back the money you borrowed but you'll have to pay taxes and penalties of anywhere between 34-47%. So my question to you is, how many stories have you heard lately of people losing their jobs? No job is secure, please remember that before you take out these kinds of loans. Here is a link to backup what I've told you.

On top of all this risk, he add a possible balance of $2000 on his credit card for the purchase of his fiancee’s engagement ring. All it takes for this young man's brilliant plan to go from  good to nightmare is the loss of his job. When that happens his 401K loan becomes due, and even though him and his new bride could last for a little while on his savings, it probably won't last long now that he has a huge tax bill on his hands. On top of that, he probably won't be able to pay on his new mortgage. As for his credit card, he probably won't be able to pay it off every month like he says he does, in fact, they will probably live off them to make up the loss income. This is the type of stuff we hear about all the time. It's not too far fetched to think this could happen. All it will take to knock over his perfect house of cards is one bad event. With this amount of risk he set himself up with, all he has to do is trip and he'll be in a world of hurt.

I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thank you!


Money lessons from Smallville



Money lessons from Smallville

By Keith Bunn Jr.
November 25, 2012

Smallville

Have you ever watched the TV series Smallville? If you haven't, Smallville is the story about the young Clark Kent (a.k.a. Superman) living on his adopted parent's Kansas farm. In the series you follow Clark as he discovers and develops his super abilities as well as his existing and future relationships. One of those relationships is with his longtime high school sweetheart, Lana Lang.
To make a long story short, in one of the episodes, Clark and Lana are visited by a trio of superhero time traveler. After everything is said and done and the day is saved once more, a couple of the time travelers vaguely tell Clark and Lana what is to become of them in the future  Shortly after the trio go back to their time, Clark and Lana discuss what they were told, and towards the end of their conversation, Lana wisely tells Clark, "Our destinies are not written in some book in the future  we write it ourselves everyday." Which Clark follows up with, "Then the question is, what do we write next?"

Where Does the Money Part Come In?

Now I know that what they said had nothing to do with money, but those two comments could very easily be used when discussing it. Let me explain by rewriting it a bit...  
"Whether our destinies are for us to be broke or wealthy, it is not written in some book in the future, we write it ourselves everyday."
"Then the question is, what do we write next, are we going to be broke or wealthy?"
You see, it is what we do with our money that will determine whether we will be wealthy or broke. Just because you maybe broke now, doesn't mean that you'll always be broke, and just because you maybe wealthy now, doesn't mean you'll always be wealthy, it all depends on what you do.

Questions

1) Do you want to be wealthy or poor?
2) What are you going to do about it? 
3) Do you feel like your financial situation is going to stay the same no matter what you do? 
4) What are some of the things you can do now to start changing it?
5) Do you need help making those changes?  Let me help. 

I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thank you!



Sunday, November 18, 2012

You want to win with your money, change your behavior


You want to win with your money, change your behavior

By Keith Bunn Jr.
November 18, 2012

For most people, a second part time job or some overtime is necessary to either get out of debt or to pick up the financial slack due to someone in your household not working anymore. No matter what you're doing, for whatever reason, you will not win with your money if you don't change the behaviors that got you into your mess in the first place. Personal finance is 20% knowledge, 80% behavior. To put it another way, we all know that we are supposed to eat good and exercise regularly, but a good portion of us don't do it, myself included. It is just so much easier to do whatever we've always been doing. But it makes no sense to work all those extra hours, earning all that extra money if you are still spending more than you make. Its not an easy task and it does take more self discipline for some people, but if you can make the changes necessary to win with your money, you will find no greater reward than being debt free and have money in the bank.

Questions

I really only have one question for you this week.

1) What changes can you and your family make in order to win with money? 

I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thank you!


Sunday, November 11, 2012



Have You Helped a Veteran Today?

By Keith Bunn Jr.
November 11, 2012


In light of it being Veteran's Day today, I'd first like to wish all my brothers and sisters in arms a blessed Veteran's Day and thank you all for your service both presently and in the past!!!

Because it is Veteran's Day, I'd like to talk about some of the things I did, that I shouldn't have done financially, while I was in the military. 

Now that I have been out of the military going on 15 years now, I've had some time to look back and see some of the things I shouldn't have done and think about what I learned from them.
When I joined the Army back in August, of 1986, I was 19 years old and fresh out of high school. It was the first time really away from home and on my own. So in a sense, it was like I was going away to college but instead learning math, science, and English  I was learning how to blow things up, camouflaging myself to my surroundings, and how to drive armored vehicles. 
As a private in the Army, single and living in the barracks, I didn't make a lot of money, especially for the amount of work we did, and when I think about it, I really didn't need a lot of money. I had 3 square meals made for me each day 24/7, a warm dry bed to sleep in (a good portion of the time), and electricity and water was provided (again, a good portion of the time). I had everything I needed to live on, so that made the money I was earning, I could do with it what I pleased. So I had the PERFECT opportunity to save all, if not most of my pay and leave the military with a boat load of cash in my pocket, but that's not what I did. I blew it all!! 

Back in those days, it was a time of buying A LOT of crap I didn't need. I bought an old style (new then) 35 mm camera and lens for $400, a HIFI stereo VCR for $500, a movie on video tape for $80, a big box of comic books for $65, two completely different stereo systems for over a $1000, and the list goes on and on. And on top of all of that, I partied my tail off!!! Any night I could go to the bars, I did! I laughed and kind of made fun of one of my room mates because he just stayed in the barracks and nothing, but when we were getting ready to clear the Army and the post, he was the one who had the last laugh. When we closed out our bank accounts there on post, I walked out with $90 to my name. He walked out with $10,000.  No one pulled me off to the side to tell me that I needed to think about the future. What a waste!

The thing is, everyone in the financial world talks about the college students and debt, but I rarely hear anything about our service men and women and debt or how to save. In my opinion, the two are one in the same and they are both being marketed to just as hard to go into debt and stay into debt. Today's single soldiers that live in the barracks are bombarded from all kinds of debt companies like payday lenders as soon as they walk off the base, looking for every opportunity to take their HARD earned cash away from them.

In fact, 56% of our service members have some sort of money issues going on in their lives and it is the #1 reason they lose their security clearances, which causes even more financial hardships. Our service men and women, as well as our older veterans deserve better then that.

So if you know a young service member or an older veteran that needs some help dealing with their finances and you think you can help them, then help them! They either have risked or are currently risking their lives on almost a daily bases so we can enjoy the freedoms we have today.

I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thank you!


Sunday, November 4, 2012

Change



Change

By Keith Bunn Jr.
November 4, 2012

Let's face it, changing something in our lives when we've done it a certain way for a long time is hard to do. But sometimes the changes are necessary to better our lives and grow. My wife struggled with change about nine months ago after she quit her job of about 15 years and moved out of a home and away from a town she had lived in for over 20 years. But now she thinks it was a good move on our part. She loves her new job and has gotten use to her new surroundings. I too struggle with change from time to time. Years ago when I moved from Georgia back to Michigan and leaving a failed marriage and my kids with their mother behind was extremely hard for me back then. But there is one thing I've learned from all the changes in my life and that is sometimes change comes along when we decide to do it. Other times life decides for us. And even though we can't predict all the changes that will take place in our lifetime, we can either try to prepare for it or be a victim of it, it's our choice.

“The only thing constant in life is change” -  Fran├žois de la Rochefoucauld -

I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thank you!